"How the DOL Fiduciary Rule Will Affect Plan Sponsors"SHRM
Erin Sweeney was quoted regarding how the U.S. Department of Labor (DOL) fiduciary rule will affect plan sponsors. The DOL adopted a phased implementation approach to the final rule. "The good news is that major participant disclosures as well as the new documents, forms and contracts that need to be modified, updated and run by your legal team are tied to the Jan. 1, 2018, deadline," Sweeney said. "The regulation itself is going to be applicable [in April 2017], which means the educational requirements and investment advice provisions are going to be effective a year from now."
The final rule follows the proposed rule in that in allows advisers and plan sponsors to provide general education on retirement saving without triggering fiduciary duties. If nonfiduciaries are presenting participants with asset allocation models that reference specific investment alternatives, "there has to be someone who is taking a look at that and making sure that these materials are presented as hypothetical examples and not treated as individual investment recommendations," Sweeney said, adding that the "lynchpin is that there has to be a plan fiduciary who is going to take ownership of the plan investments that are made available to participants and beneficiaries."
The rule will have a significant effect on rollovers from 401(k) and similar defined contribution plans to individual retirement arrangements (IRAs). "In the final rule, the DOL still indicated that a recommendation to roll money out of a 401(k) plan to an IRA is a fiduciary decision. They stuck hard on that and drew a line in the sand," Sweeney said. "The DOL sort of paternalistically has reached the conclusion that participants are better off in employer 401(k) plans where there is a plan fiduciary deciding on the available investments, and where ultimately there could be a lawsuit brought if one of those investments are shown not be have been appropriate for the participants as a whole." As a result, "more people will just simply, by inertia, keep their dollars in 401(k) plans, and that may not be right for everybody," she said.